TMI Tax Updates - e-Newsletter
September 5, 2023

Case Laws in this Newsletter:

GST Income Tax Customs Insolvency & Bankruptcy Service Tax Central Excise Indian Laws

Articles

1. Change in the Registered Address of the Company

   By: Ishita Ramani

2. Instruction regarding implementation of the judgment of the Hon’ble Supreme Court in the case of Pr.CIT (Central-3) v/s Abhisar Buildwell Pvt.Ltd. (Civil Appeal No. 6580 of 2021)

   By: Vivek Jalan

3. SEBI INTERMEDIARY - MERCHANT BANKERS

   By: DR.MARIAPPAN GOVINDARAJAN

4. Authority to issue Provisional Attachment Order under CGST Act is solely vested with the Commissioner

   By: Bimal jain

5. ITC is eligible on input used for construction of foundation of machinery

   By: Bimal jain

News

1. Auction for Sale (re-issue) of (i) ‘7.06% GS 2028’, (ii) ‘7.18% GS 2033’ and (iii) ‘7.30% GS 2053’

Notifications

LLP

1. 01/03/2021-CL-V (Pt. IV) - G.S.R. 644 (E) - dated 1-9-2023 - LLP

Limited Liability Partnership (Second Amendment) Rules, 2023

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/DDHS/PoD1/CIR/P/2023/150 - dated 4-9-2023

New format of Abridged Prospectus for public issues of Non-Convertible Debt Securities and/or Non-convertible Redeemable Preference Shares’

DGFT

2. Trade Notice No. 26/2023-24 - dated 4-9-2023

Pre-shipment and Post-shipment Export Credit and Packing Credit in Foreign Currency (PCFC) for E-Commerce Exports

Customs

3. Instruction No. 26/2023 - dated 1-9-2023

Union Home Minister's Special Operation Medal

Highlights / Catch Notes

GST

• Input Tax Credit Denied for Leasehold Land Acquisition for Chemical Facility Construction Under GST Section 17(5)(d.

  Case-Laws - AAR : Input tax credit - Leasehold services - The applicant himself has admitted that the leasehold rights of the land have been acquired for setting up/expanding its manufacturing facility for manufacture of chemicals which implies that there will be construction on the said land. This being the case, the services in question is to be utilized subsequently for construction of an immovable property (other than P&M) on his own account. - Credit is hit by section 17(5)(d) - AAR
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• Factory Canteen Food Deduction Not a 'Supply' u/s 7 of CGST Act for Permanent Employees Only.

  Case-Laws - AAR : Scope of supply - subsidized canteen facility at factory - The subsidized deduction made by the applicant from the employees who are availing food in the factory would not be considered as a ‘supply’ under the provisions of section 7 of the CGST Act, 2017. However, the aforementioned finding is only in respect of employees i.e. permanent employees. - AAR
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• Input Tax Credit Eligible for Canteen Services for Employees, Excludes Contractual Workers Under GST Rules.

  Case-Laws - AAR : Availability of Input tax credit (ITC) - canteen services provided to employees - subject to the condition that the burden of GST have not been passed on to the employees. The applicant is eligible for proportionate ITC on permanent employee, on food supplied by canteen service to employees only and not contractual workers. - AAR
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• "Crackle" Ingredients Exclude It from Sugar Boiled Confectionery Classification Under Notification 01/2017, Schedule III, Serial 32AA.

  Case-Laws - AAR : Classification of goods - Sugar boiled confectionery or not - The product by name “Crackle”, manufactured and supplied by the applicant containing the ingredients Sugar, Cashew Nuts, Butter, Liquid glucose and other permitted Flavours, not to be classified under the Tariff Heading 1704 enumerated at Serial number 32AA of Schedule III of Notification No. 01/2017 as a Sugar boiled confectionery. - AAR
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Income Tax

• Re-evaluation Ordered u/s 264 for Mistaken Financial Year Treated as Assessment Year in Tax Return.

  Case-Laws - HC : Revision u/s 264 - Determination of income of assessee - Mistake in treating the Financial Year as Assessment Year - In the present case, as per petitioner in his return of income he has made mistakes as noted earlier in this order. Looking at the mistake, it is rather obvious that it was not a deliberate mistake or an attempt to gain some unfair advantage or to evade any tax. - Matter restored back for re-adjudication - HC
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• Joint Venture Payments Not Subject to TDS u/ss 194C or 194H of Income Tax Act.

  Case-Laws - AT : TDS u/s 194C and/or 194H - assessee who is a Joint Venture made a payments to one of its constituents for execution of work awarded to it and payments made to another constituent as compensation, constitutes payment in the nature of commission - There is no TDS liability under any of the two provisions - AT
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• Assessee's Deduction Claim for Multiple Flats u/s 54F Validated in Joint Development Agreement Case.

  Case-Laws - AT : Deduction u/s. 54F - flats to be received in pursuant to JD Agreement - There is no dispute with regard to the fact that, the assessee has claimed deduction u/s. 54F of the Act for multiple flats and said claim is in accordance with law - AT
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• Disallowance u/s 14A and Rule 8D Confirmed for Interest on Loan Used for Partnership Investment.

  Case-Laws - AT : Disallowance u/s 14A r.w.r. 8D - interest paid by the assessee on LIC loan - Investment in partnership firm by the partner out of loan taken from LIC - it is case of the partner and therefore what is to be examined is whether the share income is excluded from his total income. The answer is obviously in the affirmative - In an ex-parte order, Disallowance u/s 14A confirmed - AT
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• Incorrect Denial of Loss Due to Misclassification of Revised Return as Belated; Claim Allowed Based on Evidence.

  Case-Laws - AT : Filing of revised return - denial of loss - Considering the revised return date as belated return, whereas original ITR was filed in time - the intimation under challenge has not considered the fact that the return filed on 15.01.2020 was not the original return but was revised one and therefore, the denial of loss is not correct based on the set of facts and evidence available on records. - Claim allowed - AT
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• Deduction Allowed for Embezzlement Losses by Employees Considered Revenue Loss for Assessee-Society.

  Case-Laws - AT : Claim of deduction against Embezzlement of funds by the employees of the assessee-society - Undisputedly, no doubt has been cast on the embezzlement of funds - Considering the loss is a revenue loss, the same deserves to be allowed. - AT
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• Tax Department's Addition Deleted: Assessee Proves Capital Source from Aunt's Matured FDRs with Evidence and Family Confirmation.

  Case-Laws - AT : Addition on account of Capital Introduction - source of principal amount of FDRs - the constant effort made by the assessee to justify his stand that the credit is from maturity of old FDRs made by his aunt who was taken care of by the assessee only in the absence of her relative staying abroad which fact was also confirmed by other relatives of the assessee with supporting evidences as we have already discussed hereinabove, we find that the impugned addition made by the Department is of no basis and thus, deleted. - AT
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• No Penalty for Late Tax Audit Report: Proof of Submission to Assessing Officer Satisfies Section 271B Requirements.

  Case-Laws - AT : Levy of penalty u/s. 271B - default in furnishing of Tax Audit Report - In section 271B of the Act, the only requirement is to get the accounts of assessee audited or furnish the report of audit as required u/s 44AB of the Act. There is no requirement either to file or supply at the time of filing of return of income. The only requirement is to get accounts audited. - Assessee had filed the proof of furnishing the audit report before AO - No penalty - AT
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• Income Not Accrued in India: Software Trader's Royalty Receipts Exempt as No Copyright Transfer Occurred, Says CIT(A).

  Case-Laws - AT : Income deemed to accrue or arise in India - Royalty receipt - The assessee is merely a trader of software, hence, has no domain or ownership over the software. Thus, when the assessee does not have any ownership over the softwares sold, it could not have transferred the right to use of copyright of the software to distributors/customers in India. - CIT(A) rightly deleted the additions - AT
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Customs

• Customs Broker's License Revocation Overturned Due to Insufficient Evidence of Fraud Scheme Participation; Penalty and Forfeiture Upheld.

  Case-Laws - AT : Revocation of Customs Broker License - The Adjudicating Authority without any material has observed that the Customs Broker played an active role in the scheme devised by various unscrupulous importers to defraud the Revenue by evading the customs duty - There is no material, even remotely suggest that he was privy to the actual activity of facilitating the import. - Order of revocation set aside - However, forfeiture of the security deposit and penalty of Rs. 50,000/- maintained - AT
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• Confiscation and penalties overturned due to missing CLRI report in finished leather case. Goods and fines set aside.

  Case-Laws - AT : Confiscation - redemption fine - penalty - finished leather or not - The CLRI report is a very crucial document in deciding the issue as to whether the impugned goods are finished leather or not. The Department has failed to supply the copy of the report to the appellant and also furnish copy before the Tribunal - the confiscation of goods, imposition of redemption fine, penalty and the demand of duty therefore cannot sustain and requires to be set aside. - AT
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• Court Rules Burden of Proof on Agency in Gold Smuggling Case; Jewelry Lacks Foreign Markings Indicating Import Origin.

  Case-Laws - AT : Smuggling - Confiscation of gold / gold jewellery - burden to prove - on all the jewellery, there are no foreign markings and hence, there is no reasonable basis to conclude these to be of imported origin - the burden of proof does not shift to the appellants, but the burden lies on the investigating agency to prove that the seized jewellery were of foreign origin. - AT
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IBC

• Party's Delay in Filing Claims Leads to Loss of Financial Creditor Status in CIRP Case.

  Case-Laws - AT : CIRP - Financial Creditor or not - Nothing prevented them from filing their claims but instead they chose to adopt a wait and watch strategy - having failed to file their claim in the appropriate format and in a timely manner due to their own negligence, they should be ready to suffer the consequences of late and improper filing. - AT
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• Sales Tax Department's asset attachment during CIRP doesn't transfer ownership; assets remain with Corporate Debtor for liquidation.

  Case-Laws - AT : CIRP - attachment on the assets of the property by the sales tax department - even when there is attachment of the assets, Sales Tax Department cannot be the owner of the assets and the asset continued to be owned by the Corporate Debtor and will be part of the Liquidation Estate. - AT
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Service Tax

• Franchise Agreement Ruled Out: No Service Tax on Marketing-Only Contracts, No Representational Rights Granted.

  Case-Laws - AT : Levy of service tax - franchisee service - From the terms of agreement, appellant is not given any representational right to its distributors to sale or manufacture goods or provide service or undertake any process identify with the franchisor and the agreement is purely for marketing of product and therefore same cannot be termed as agreement between the franchisor and franchisee. - AT
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Case Laws:

• GST

• 2023 (9) TMI 166
  Constitutional Validity of Rule 5A of the Service Tax Rules 1994 - it is also sought that Rule 5A has lapsed and does not survive after the introduction of the Central Goods and Services Tax Act 2017 - HELD THAT:- Subsequently and once the Act came to be repealed consequent to the advent of CGST, an issue appears to have been addressed with respect to the validity of proceedings pending or to be initiated under the Rules. This Court was called upon by the respondents to hold that the proceedings initiated under Rule 5A(2) and which may pertain to or be pending on the date when CGST came into effect would stand saved by virtue of Section 174 of the CGST. The Division Benches of this Court in AARGUS GLOBAL LOGISTICS PVT. LTD. VERSUS UNION OF INDIA ANR. [ 2020 (3) TMI 811 - DELHI HIGH COURT] andVIANAAR HOMES PRIVATE LIMITED VERSUS ASSISTANT COMMISSIONER (CIRCLE-12) , CENTRAL GOODS SERVICES TAX, AUDIT-II, DELHI ORS. [ 2020 (11) TMI 150 - DELHI HIGH COURT] proceeded to accept the submission addressed on behalf of the respondents and held that the proceedings which had already been initiated or which related to a period prior to the repeal of the Act would stand saved. However, it appears that the decisions in TRAVELITE (INDIA) VERSUS UOI AND OTHERS [ 2014 (8) TMI 200 - DELHI HIGH COURT] and MEGA CABS PVT. LTD. VERSUS UNION OF INDIA ORS. [ 2016 (6) TMI 163 - DELHI HIGH COURT] were not brought to the notice of the Division Benches and the matters appear to have been argued as if Rule 5A continued to exist on the statute book. That would clearly appear to be a factual inaccuracy. Application disposed off.

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• 2023 (9) TMI 165
  Input tax credit - services received from Vapi Enterprise Ltd in the form of transfer of its rights in the leasehold land owned by GIDC - HELD THAT:- The applicant wishes to use the service received from M/s VEL, in the form of leasehold rights to land of GIDC and intends to set up a new manufacturing plant/expand its existing manufacturing plant. This being the fact, clearly shows that the service of leasehold rights to land was received and is a precursor to construction being carried out on the said land to set up a new manufacturing plant/expand existing manufacturing facility. It is clearly hit by 17(5)(d) of CGST Act, 2017 also bringing the non obstante clause into play. For repetition, 17(5)(d), ibid, as already stated, bars ITC on services received by a taxable person for construction of an immovable property (other than P M) on his own account including when such services are used in the course or furtherance of business. The applicant himself has admitted that the leasehold rights of the land have been acquired for setting up/expanding its manufacturing facility for manufacture of chemicals which implies that there will be construction on the said land. This being the case, the services in question is to be utilized subsequently for construction of an immovable property (other than P M) on his own account. The ITC therefore would clearly be hit in terms of section 17 (5)(d) of CGST Act, 2017. The applicant is not entitled to take ITC of the CGST SGST paid by them on the services received from Vapi Enterprise Ltd in the form of transfer of its rights in the leasehold land owned by GIDC in terms of Section 17(5)(d) of the CGST Act, 2017.

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• 2023 (9) TMI 164
  Scope of supply - subsidized canteen facility - Part of the cost deducted by the applicant from its employees, who are availing food in the factory - section 7 of the CGST Act, 2017 - HELD THAT:- In terms of Section 7 of the CGST Act, 2017, supply means all forms of supply of goods/services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. The exception being Schedule I, which includes the activities made or agreed to be made without a consideration and Schedule III, which includes activities which shall be treated neither as a supply of goods or services. The applicant s case is that they employ more than 250 employees including contract workers in their factory and that they have been provided with canteen facility in terms of section 46 of the Factories Act, 1948. The subsidized deduction made by the applicant from the employees who are availing food in the factory would not be considered as a supply under the provisions of section 7 of the CGST Act, 2017. However, the aforementioned finding is only in respect of employees i.e. permanent employees. Contract worker s portion of canteen charges - HELD THAT:- The contractual worker in the factory is primarily engaged for carrying out the activity which is either directly or indirectly related to manufacturing activity. The contractual worker in the instant case, is under scope of definition of Worker stipulated under Section 2(l) to be read with Section 46 of the Factories Act, 1948 - The applicant has entered into agreement with Contractor to provide them workers in lieu of consideration. The applicant has paid the agreed amount to the contractor and the contractor pays the salary/wages to such contract workers. Therefore, it evident that the instant case does not pass the test of employer-employee relationship as far as the contract workers and the applicant is concerned and therefore does not fall within the ambit of entry 1 of Schedule III of CGST Act, 2017. The applicant has established canteen facilities as mandated under section 46 of the Factories Act, 1948 and supplies food at a subsidized cost through CSP. The supply of food by the applicant is supply of service by the applicant to their contractual worker/s. the cost, which is recovered from the salary of contractual worker, as deferred payment is consideration for the supply and GST is liable to be paid. The principal employer is also cast the responsibility of providing the canteen facility to the contract labourer and that such responsibility is not solely cast upon the contractor; that the applicant in this case only undertakes to provide maintain canteen facilities to the contact workers. We have gone through the concerned sections and the rules - it is clear that this is a contract entered into by the applicant with the contractor and not with the contract workers. Even otherwise, the onus shifts to the principal employer [ie the applicant] only in case of failure of the contractor to provide such facility. Nothing is brought on record to exhibit that the contractor who supplied workers to the applicant, in this case, failed to provide the canteen facilities. The averment therefore is not legally tenable. The recovery of amount from contractual worker on account of third party canteen services provided by the applicant would fall within the ambit of the definition of outward supply as per section 2(83) of the CGST Act, 2017 and therefore, is liable to tax as a supply under GST. Input Tax Credit - ITC of GST charged by the CSP would be eligible for availment by the applicant - HELD THAT:- ITC will be available to the appellant in respect of food and beverages as canteen facility is obligatorily to be provided under the Factories Act, 1948, read with Gujarat Factories Rules, 1963 as far as provision of canteen service for full time/direct employees working on permanent basis at the factory is concerned. It is further held that the ITC on GST charged by the canteen service provider will be restricted to the extent of cost borne by the appellant only. ITC on canteen charges on the food supplied to contractual worker - HELD THAT:- The provision of Chapter V of CLRA stipulates that labour contractor shall provide the canteen facility to the labour employed by the contractor. Thus, there is no direct mandate to the applicant company to provide canteen facility to the contractual worker - In the instant case the applicant company and contractual workers, do not fall within the ambit of employer-employee relationship and further, it is not obligatory on the applicant company to provide canteen facility to the contractual worker as per provisions of CLRA Act. Section 17(5) allows ITC on food, beverages outdoor catering only in case it is obligatory under any law for the time being in force. Thus applicant is not eligible of ITC on the food supplied by CSP to contractual worker and it is blocked under Section 17(5) (b) of CGST Act, 2017 - applicant is not eligible to the ITC on food supplied to the contractual worker under Section 17 (5) (b) of CGST Act, 2017.

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• 2023 (9) TMI 163
  Input tax credit (ITC) - canteen services provided to employees - vendor invoices received towards food served in the canteen - HELD THAT:- The canteen facility is to be compulsorily made available to the workers of the applicant and the number of the workers is well above 250. As per the licence of the Factories Act order given to the applicant, the man power is amended to 500 to 1000 workers which mandates them as per Factories Act and AP Factories Rules to provide for a canteen. The only question to be answered is that whether they are eligible for taking ITC on the GST charged by the vendors on them. Due to the mandatory nature of maintenance of canteen and the proviso under the sub-section of blocked credit, ITC will be available to the applicant in respect of GST charged by the vendors of canteens.

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• 2023 (9) TMI 162
  Classification of goods - Crackle, containing the ingredients Sugar, Cashew Nuts, Butter, Liquid glucose and other permitted Flavours - classified under the Tariff Heading 1704 enumerated at Serial number 32AA of Schedule III of Notification No. 01/2017 as a Sugar boiled confectionery or not - HELD THAT:- As per HS explanatory notes, Heading 1704 of HSN covers most of the sugar preparations which are marketed in a solid or semi-solid form and generally suitable for immediate consumption thus collectively referred to as sweetmeats, confectionery or candies (based on C.B.E C FAQs issued on 29-09-2-17), Where as , Sugar boiled confectionery is sugar and water, etc, boiled at such a temperature that practically no water remains and a vitreous mass is formed ,is bought and consumed by end users. In the present scenario, the impugned product is sold only to ice-cream manufactures. As per the submissions of the applicant, the impugned products are not meant for consumption by the end users directly but are used in the process of ice-cream making, specifically used as toppings only. Hence, the impugned product under the name N.B.S. Crackle which is an industrial input cannot be classified under sugar boiled confectionery . The product by name Crackle , manufactured and supplied by the applicant containing the ingredients Sugar, Cashew Nuts, Butter, Liquid glucose and other permitted Flavours, not to be classified under the Tariff Heading 1704 enumerated at Serial number 32AA of Schedule III of Notification No. 01/2017 as a Sugar boiled confectionery.

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• Income Tax

• 2023 (9) TMI 161
  Commission payment claimed as deduction - deductible business expenditure or not? - No evidence to show that services have been rendered - test of commercial expediency - AO allowed only 1/3rd as deductible expenditure and disallowed balance 2/3rd on the ground that the entire payment cannot be considered as laid out wholly and exclusively for the purpose of the business because neither the Appellant Assessee nor the recipients of commission could show that orders were procured with their assistance HELD THAT:- Merely because the contracts awarded to the Appellant is by Government/ Public Corporations that does not mean that the Appellant-Assessee cannot obtain services of the commission agents to assist them in the tendering process and for follow up action for recovery of the money, as for the Appellant it is fully a commercial activity and engaging expert/specialised services is under a written contract is entered between the commission agents and the Appellant. It is not the case of the Revenue that there is any legal prohibition for the Appellant- Assessee to avail services of such commission agents. It is also not the case of the Revenue that these commission agents within the meaning of the Act are entities/persons related to the Appellant-Assessee and/or they are government employees. Therefore, in our view, it is the business prerogative of the Appellant-Assessee as to whose services they should engage in the course of its business and on what terms and conditions. Most significantly, the fact that the AO and the Tribunal have allowed part of the commission payment for the purpose of business also indicates that the Revenue has accepted the services rendered by and this part of expenditure in that regard was held to be allowable. There cannot be a contradictory course of action as the Revenue needs to be consistent. It is for the AO to decide, whether, any commission paid by the Appellant-Assessee to his agents are wholly or exclusively for the purpose of his business and the mere fact that the Appellant-Assessee establishes the existence of an agreement between him and his agent and the fact of actual payment, the discretion of an officer to consider, whether such expenditure was made exclusively for the purpose of the business is not taken away. The expenditure incurred must be for commercial expediency. However, in applying the test of commercial expediency for determining whether an expenditure was wholly and exclusively laid out for the purpose of the business, reasonableness of the expenditure has to be adjudged from the businessman s point of view and not from the Revenue s perspective. AO and the Tribunal were not justified in disallowing part of the commission payment - Decided in favour of assessee.

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• 2023 (9) TMI 160
  Allowability of expenses in respect of Sales Support Services and Management Fee - whether they had no direct nexus with the project and was not subject to proportionate disallowance as per Accounting Standards AS-7? - ITAT confirmed deleting the proportionate disallowance as done by CIT(A) - AO stated that Assessee had completed only 26.32% of the project and had rightly allowed the proportionate expenditure - HELD THAT:- Both appellate authorities found that there was no doubt about the genuineness of the expenses incurred, that expenditure was incurred for various personnel and that it had direct correlation to the business of Respondent. Both appellate authorities also accepted that no construction business would run without incurring such kind of expenditure. CIT(A) and ITAT having come to factual finding that the expenses incurred by the Respondent-Assessee on salary of the office employees/management fees do not have any direct nexus with the project and can not be disallowed on the proportionate basis because such expenditure fall in the category of expenditure incurred for running of day to day business, no substantial question of law arises.

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• 2023 (9) TMI 159
  Revision u/s 264 - Determination of income of assessee - While filing the ITR form, petitioner mistook the assessment year to be financial year and all the details of income for Assessment Year 2014-2015 were filled in the return of income for Assessment Year 2013-2014 - respondent no 1 rejected petitioner s application on merits because according to him, the assessee had sought a revision on some fact which was indisputably apparent from record - HELD THAT:- As the power conferred u/s 264 of the Act is very wide, in our view, the Commissioner is duty bound to apply his mind to the application filed by the assessee and pass such order thereon. Section 264 of the Act also empowers respondent no. 1 to call for the record of any proceedings under the Act in which any order has been passed and make such inquiry or cause such inquiry to be made and pass such order as he thinks fit. Therefore, if respondent no. 1 feels that detailed inquiry is necessary and he will be hard pressed for time, he may cause such inquiry made by the AO and direct the AO to file a report. In the present case, as per petitioner in his return of income he has made mistakes as noted earlier in this order. Looking at the mistake, it is rather obvious that it was not a deliberate mistake or an attempt to gain some unfair advantage or to evade any tax. In the circumstances, we quash and set aside the order passed under Section 264, order under Section 154 of the Act and intimation issued under Section 143(1) and remand the matter for denovo consideration to respondent no. 1 to dispose petitioner s application under Section 264 of the Act on merits.

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• 2023 (9) TMI 158
  Attachment orders issued u/s 281B - seeking to attach the assets of the petitioner along with the personal assets of its Directors - HELD THAT:- The language of Section 281B (1) and (2) of the Income Tax Act, 1961 are clear and categorical. The order of attachment is to initially remain in force for a period of six months from the date of attachment provided other criteria in Sub-Section (1) are satisfied. In these cases, circumstances and criteria specified in Sub-Section (1) to Section 281B of the Income Tax Act, 1961 are satisfied. Since the respondents have issued subsequent orders/warrant of attachment of the same immovable properties by separate orders all dated 17.02.2023, nothing further remains to be adjudicated in these writ petitions. As such these writ petitions have become infructuous. As per proviso to sub-section (2) to Section 281 B of total period of extension cannot exceed two years or 60 days after the date of order of assessment or reassessment, whichever is later. In these cases, the first orders of attachment were under Section 281B of the Income Tax Act, 1961 made on 28.02.2022. It comes to an end on 27.08.2022. Assessment orders were passed on 31.12.2022. Fresh attachment orders were passed on 17.02.2023. These orders also would have come to an end on 16.08.2023. The remedy in these Writ petitions have worked out due to efflux of time. Thus, nothing survives for adjudication in these writ petitions. Even before 27.08.2022, impugned order dated 23.08.2022 was passed. The order would have come to an end on 22.02.2023, meanwhile, liberty is however given to the petitioners to challenge the subsequent orders dated 17.02.2023, in accordance with law. These writ petitions are closed with the above observations.

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• 2023 (9) TMI 157
  Validity of reopening of assessment u/s 147 - reopening beyond period of four years - reasons to believe - HELD THAT:- As in the case of Hindustan Lever Ltd.[ 2004 (2) TMI 41 - BOMBAY HIGH COURT] wherein as held that the notice was clearly beyond the period of four years. The reasons recorded by the AO nowhere stated that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment for that assessment year. Hence the AO had no jurisdiction to reopen the assessment proceedings. The notice was not valid and was liable to be quashed. As the reopening is bad in law, in view of the Proviso to section 147 as the reopening is beyond 4 years from the original assessment u/s 143(3) of the Act. As, we have discussed and decided the legal issue in favour of the assessee and the re-assessment order u/s 147 r.w.s. 144 of the Act, itself has attained nullity, the grounds on merits are only academic in nature and the same are not dealt with.

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• 2023 (9) TMI 156
  TDS u/s 194C and/or 194H - assessee who is a Joint Venture made a payments to one of its constituents for execution of work awarded to it and payments made to another constituent as compensation, constitutes payment in the nature of commission - HELD THAT:- Considering the facts and circumstances of the case fulfilment of the attributes of not treating a JV as an AOP prescribed under CBDT Circular No. 07 of 2016 dated 07.03.2016 ,as issued considering the dispute in respect of consortium contracts which are formed to implement large infrastructure projects, we are of the considered view that assessee JV does not fall in the category of AOP under the Act. Further, there does not exist a relationship of a contractor and sub-contractor within the meaning of section 194C, therefore, question of deduction of tax at source does not arise. Once there is no liability to deduct tax at source, holding assessee JV as assessee in default is also not tenable. Application of sec 194H for the compensation paid to RAMKY, out of the gross bills received from NHDICL, by treating it as commission. Definition of commission as contained in section 194H does not befit the payment of 2.25% made to RAMKY to subject it to tax deduction at source. From the definition of commission contained in Explanation to section 194H in the present case, compensation paid by assessee JV is not for acting on behalf of JV for any service. Further, there are no services taken by the JV in the course of buying or selling of goods nor there is any transaction relating to any asset, valuable articles or thing. Accordingly, the payment is not in the nature of commission and section 194H does not get attracted. Hence, assessee JV is not to be treated as assessee in default. Assessee cannot be held to be the assessee in default u/s. 201(1) and liable for interest charged u/s. 201(1A) - Decided in favour of assessee.

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• 2023 (9) TMI 155
  Deduction u/s. 54F - flats to be received in pursuant to JD Agreement - AO denied deduction as assessee has acquired multiple flats in violation of conditions prescribed u/s. 54F and the construction of new residential house property was not completed on or before three years from the date of transfer of original asset - HELD THAT:- There is no dispute with regard to the fact that, the assessee has claimed deduction u/s. 54F of the Act for multiple flats and said claim is in accordance with law, in light of the decisions of various High Courts including Smt. V.R. Karpagam ( 2014 (8) TMI 899 - MADRAS HIGH COURT ). A similar issue has been taken in the case of K.G. Rukminiamma [ 2010 (8) TMI 482 - KARNATAKA HIGH COURT] Therefore, we cannot find fault with the claim of the assessee on this ground alone. Construction of house property was not completed within three years from the date of transfer of original asset - We find that the assessee has admitted the fact that the builder did not complete construction of house property on or before three years from the date of transfer of original asset. Therefore, we cannot find fault with the reasons given by the Assessing Officer to reject deduction u/s. 54F on this ground. Assessee has made a new claim before the CIT(A) and sought deduction u/s. 54F in respect of purchase of new residential house property purchased - CIT(A) rejected alternate claim made by the assessee without discussing how such claim cannot be admitted. In the present case, the assessee has purchased a new residential house property on 25.04.2012, which is within two years from the date of transfer of original asset. The assessee has satisfied other conditions because, the new residential house property was purchased on or before due date for filing return of income u/s. 139(1) of the Act and thus, she need not to keep sale consideration in capital gains deposit account scheme as per the provisions of section 54F(4) of the Act. Since, the appellant has satisfied all conditions prescribed for claiming deduction u/s. 54F of the Act, in our considered view, the ld. CIT(A) ought to have allowed alternate claim made by the assessee for deduction u/s. 54F of the Act. Thus, we set aside the order of the ld. CIT(A) and direct the Assessing Officer to allow deduction u/s. 54F of the Act, in respect of residential house property purchased by the assessee on 25.04.2012. Decided in favour of assessee.

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• 2023 (9) TMI 154
  Disallowance u/s 14A r.w.r. 8D - expenditure for earning exempted income in the form of dividend on shares - whether the disallowance u/s 14A is triggered even when exempt income is absent during the relevant year? - HELD THAT:- We find that in assessee s own case for AY 2017- 18 [ 2023 (1) TMI 1285 - ITAT INDORE] has already held that no disallowance is attracted in such cases. Coming to the subsequent development of amendment in section 14A, we have seen the Explanatory Memorandum to Finance Bill, 2022, we find that it is clearly mentioned therein that the amendment shall apply from 01.04.2022. Furthermore, the said amendment has also been examined in two decisions relied upon by Ld. AR, M/S. ERA INFRASTRUCTURE (INDIA) LTD. [ 2022 (7) TMI 1093 - DELHI HIGH COURT] and LODHA DEVELOPERS LTD. (SUCCESSOR TO PALAVA DWELLERS PVT. LTD) [ 2022 (9) TMI 152 - ITAT MUMBAI] and have held that the amendment is prospective. We are inclined to accept the pleadings made by Ld. AR for assessee. Consequently, we hold that the disallowance made by AO u/s 14 is not valid. The same is hereby deleted. The assessee succeeds in this appeal.

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• 2023 (9) TMI 153
  Validity of reopening of assessment - Cash deposit unexplained - HELD THAT:- The assessee furnished return of income in response to notice u/s 148 and that ultimately no addition on account of cash deposit in bank account was made. Before us assessee explained that there is no new deposit in the bank and that deposits in the bank belongs to Shree Swaminarayan Seva Trust which is source from the proceeds of old FDs. On perusal of record of various bank statements, find merit in the submission of assessee that the reopening for the assessment year under consideration is the same which was the basis for A.Y. 2009-10 wherein the department has already accepted and no addition was made on the basis of similar reasons of reopening. The only difference in facts are that for this year, the assessing officer made reopening by recording that the assessee made time deposits in bank account. Therefore, reopening under Section 147 of the Act on the basis of similar reasons, which was the basis of earlier assessment year (2009-10), is not justified, particularly when the assessing officer was satisfied and nor addition was made. Thus, the reopening u/s 147 is invalid and the assessment order passed by the Assessing Officer is held void ab initio. Decided in favour of assessee.

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• 2023 (9) TMI 152
  Disallowance u/s 14A r.w.r. 8D - interest paid by the assessee on LIC loan - Investment in partnership firm by the partner out of loan taken from LIC - HELD THAT:- CIT(A) relied upon the judgment passed in the case of Vishnu Anant Mahajan [ 2012 (6) TMI 297 - ITAT, AHMEDABAD] and upheld the disallowance made by the Ld. AO as held that it is case of the partner and therefore what is to be examined is whether the share income is excluded from his total income. The answer is obviously in the affirmative and provision contained in section 14A will come into operation and any expenditure incurred in earning the share income will have to be disallowed In the absence of any assistance rendered by the assessee, we do not find any reason to interfere with the order passed by the Ld. CIT(A). Decided against assessee Addition u/s 23(4) - assessee has shown more than one residential properties - assessee is staying at Mumbai being a self-occupied house property, but no rental/deemed rental income has been shown in computation of total income and show cause why the addition on account of deemed rental income should not be made - HELD THAT:- The value has been shown by the Ld. AO on the basis of decision passed in the case of Smt. Radha Devi Dalmia [ 1980 (3) TMI 62 - ALLAHABAD HIGH COURT] and already allowed standard deduction of 30% under Section 24(a) - Hence, in the absence of any assistance rendered by the assessee, we do not find any reason to interfere with the order passed by the Ld. AO and upheld by the Ld. CIT(A) impugned before us. Decided against assessee

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• 2023 (9) TMI 151
  Filing of revised return - denial of loss - Considering the revised return date as belated return, whereas original ITR was filed in time - return of income filed by the appellant u/s 139(4) was processed by the CPC, Bengaluru u/s 143(1) disallowing current year losses (Bonus and Interest) - HELD THAT:- The original return filed by the assessee is well within time. Subsequently, the assessee revised the return on 15.01.2020 while processing that return the CPC has considered that return as original and accordingly the current year losses were in the light of that fact denied to the assessee. On careful perusal of the records we observed that the intimation under challenge has not considered the fact that the return filed on 15.01.2020 was not the original return but was revised one and therefore, the denial of loss is not correct based on the set of facts and evidence available on records. Based on these set of facts ground is allowed. Assessee has prayed to award the cost of filling this appel, travelling expenses and advocate fees that is incurred on account of the revenues negligence - Since, the appeal of the assessee has been disposed under the faceless regim the contention that the officer should be made responsible is not possible under this faceless regime, where the personal contact is avoided and therefore, no prejudiced caused to the assessee. The judgement based on the set of facts understood by the ld. CIT(A) while discharging duty, action might have caused some hardship to the assessee due to error of judgement but that in our opinion does not warrant levy of cost on the Department. In the instant case, there is no such action of search and seizure which causes serious invasion in the privacy of the person. The Commissioner was discharging her quasi-judicial duty. Further, there is nothing on record to suggest that the action of the Commissioner of Income-tax was mala fide. Therefore, we do not find any merit in the submission of assessee to award cost. The decisions relied on by the assessee are distinguishable as in the decision of case of Chiranji Lal Tak [ 2001 (7) TMI 78 - RAJASTHAN HIGH COURT] there also facts were different. In that case, the respondent Income-tax Officer issued illegal notice to the petitioner and later withdrew the same. Under these circumstances, the court directed the respondent to pay for the advocate fee and litigation expenses incurred by the petitioner in prosecuting writ proceedings. As in the instant case, there is no prime facie illegality in issuing the intimation which is also system based and even the proceeding before the first appellate authority was on faceless regime. We, therefore, do not find any merit in the argument of learned counsel for the assessee to award cost. The ground raised by the assessee is accordingly dismissed.

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• 2023 (9) TMI 150
  Deduction denied u/s 80P(2)(d) - interest and dividend received from cooperative bank/cooperative society from the investments made in other cooperative banks - assessee is a cooperative society and is carrying on the activities of marketing agricultural produce grown by the members and providing credit facilities to the members by advancing loans to them - HELD THAT:- In the instant case, the amount which was invested in banks to earn interest was not any amount due to its members. Further the claim of the assessee in u/s 80P(2)(d) was not the liability. It was not shown as liability in their account. In fact this amount which is in the nature of profits and gains, was not immediately required by the assessee for lending money to its members, as there were no takers. Therefore they had deposited the money in a co-operative bank again which interest/dividend was earned. The said interest income is attributable to carrying on the business of banking and therefore it is liable to be deducted in terms of Section 80P(1) of the Act. See Andhra Pradesh State Co-operative Bank [ 2011 (6) TMI 215 - ANDHRA PRADESH HIGH COURT] . We respectfully following the view taken in the case of PCIT Anr. Vs. Totagars Cooperative Sale Society [ 2017 (1) TMI 1100 - KARNATAKA HIGH COURT] and State Bank Of India [ 2016 (7) TMI 516 - GUJARAT HIGH COURT] hold that the interest income earned by a cooperative society on its investments held with a cooperative bank would be eligible for claim of deduction under Sec. 80P(2)(d) of the Act. It is directed that the interest earned by the assessee from commercial banks may be considered under the head income from other sources and relief may be granted as available to the assessee u/s 57 of the Act in accordance with law. Accordingly ground No. 2 and 3 raised by the assessee stands partly allowed for statistical purposes.

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• 2023 (9) TMI 149
  Estimation of income - Bogus purchases - assessee before the CIT(A) submitted copies of confirmations from all three entities and copies of relevant bills and ITR and also filed stock statement, purchase and sale registers and bank statement for FY 2015-16 showing that all transactions of purchases have been included in the purchases shown in the P L account and payments have been made through banking channels - HELD THAT:- In absence of any positive and adverse material against the assessee showing and establishing above facts, no addition can be made in the hands of assessee on account of allege bogus purchases u/s. 68 of the Act or any other charging section of the Act and on account of commission payment. However, to cover up all possible leakage of revenue, we find it appropriate to follow the preposition rendered in the case of PCIT vs. Mohd. Hazi Adam [ 2019 (2) TMI 1632 - BOMBAY HIGH COURT] and restrict the addition to the element of profit embedded therein. GP rate declared by the assessee as per audited accounts may be a relevant fact but the same is not suffice to meet the requirement of tax proceedings. Therefore find it appropriate to restrict the addition to the tune of 8% of total impugned sales which is sufficient to cover all possible leakage of revenue.Additions upheld by the ld. CIT(A) are substituted by the 8% of total alleged purchases. Appeal of assessee is partly allowed.

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• 2023 (9) TMI 148
  Revenue loss or capital loss - Embezzlement of funds by the employees of the assessee-society - CIT(A) has allowed relief in part on account of the recovery made against such embezzlement - HELD THAT:- Undisputedly, the funds were embezzled on account of manipulation made by the employees of the society. The fact that the Police was able to recover some of the amount also leaves no doubt that the funds were embezzled. It is also a fact on record that although inflated expenditure had been claimed in the Income and Expenditure Account on account of these inflated bills, in the consolidated Income and Expenditure Account, whatever amount had been recovered has been disclosed as income, which in this case comes to Rs. 1,08,94,651/- out of the total embezzled funds of Rs. 1,58,03,11/-. Thus the embezzlement has occurred during the course of day to day carrying out of charitable activities by the assessee trust. Hon ble Apex Court in the case of Nainital Bank Ltd [ 1964 (9) TMI 11 - SUPREME COURT] held that the retention of money in the bank premises carries with it the ordinary risk of it being subjected to embezzlement, theft, dacoity or destruction by fire and such risk of loss is incidental to the carrying on of the operation of the business of banking and, therefore, the loss of cash by dacoity was an admissible deduction. Undisputedly, no doubt has been cast on the embezzlement of funds and we are of the considered view that loss is a revenue loss and the same deserves to be allowed. Therefore, this ground of the assessee s appeal stands allowed. Addition on account of difference in interest income as per Form-26AS and the income disclosed in the return of income - argument of assessee has declared higher interest income in earlier years, and, therefore, the same should be set off in this year does not find favour with us - HELD THAT:- The argument of the AR that the assessee has declared higher interest income in earlier years, and, therefore, the same should be set off in this year does not find favour with us. All the same, as has been stated the assessee has moved application u/s. 154 of the Act for AYs. 2013-14 and 2014-15 before the Assessing Officer to assess the correct income/interest in accordance with Form-26AS, we direct the same may be considered sympathetically after due examination of the various evidences. However, for the captioned assessment year, we decline to interfere and we dismiss Ground No.2 raised by the assessee. Trust V/S AOP - as argued since the assessee Society continues to enjoy the benefit of registration u/s. 12A of the Act, i.e., the registration has not been cancelled, the assessee could not have been assessed to tax as an AOP - HELD THAT:- As we have already deleted the addition on account of embezzled funds claimed as deduction and although we have confirmed the addition on account of difference in interest income, all the same, there is much more application of income by the assessee society and, therefore, the Assessing Officer was not justified in not allowing the benefit of exemption to the assessee u/s. 11 of the Act and taxing the assessee under the status of AOP. Accordingly, Ground stand allowed. Benefit of accumulation - Non utilization of funds - amount remained unutilized even after five years of accumulation of funds - main thrust of argument by the ld. CIT(DR) is that objects as mentioned in Form-10 are general in nature - HELD THAT:- No doubt, Form-10 filed by the assessee did not specifically mention the object for which the funds were being accumulated. All the same,in the case of CIT vs. Market Committee, Tohana [ 2011 (1) TMI 1395 - PUNJAB AND HARYANA HIGH COURT] has laid down that merely because the assessee had mentioned development work in a general manner in Form-10, it cannot be said that the condition of Section 11(2) of the Act has not been fulfilled. While coming on this conclusion, the Hon ble Punjab and Haryana High Court also referred to the judgment of Director of Income Tax vs. Mitsui Co. ( 2007 (2) TMI 215 - DELHI HIGH COURT] - Decided against revenue.

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• 2023 (9) TMI 147
  Addition on account of Capital Introduction - source of principal amount of FDRs remained unexplained - neither the assessee could establish the relationship with his aunt from whom the disputed amount was received through FDRs and signatures of legal heirs was also found to be different in gift deed and passport - CIT(A) confirmed the addition - HELD THAT:- As the assessee was made a joint holder in those FDRs by her aunt, we do not find any reason to record the same in the books of account of the assessee. Further that, once family tree has been filed by the assessee showing relationship between the assessee and said Smt. Sushilaben Patel, which is definitely come under the purview of the definition of relatives as envisaged under Section 56 of the Act, we do not find any merit in rejecting the claim of the assessee. We also note that the assessee has declared total income and we do not find any reason or any apprehension in evading tax on the credits of capital account as gift from his aunt. Considering the entire aspect of the matter, particularly, the constant effort made by the assessee to justify his stand that the credit is from maturity of old FDRs made by his aunt who was taken care of by the assessee only in the absence of her relative staying abroad which fact was also confirmed by other relatives of the assessee with supporting evidences as we have already discussed hereinabove, we find that the impugned addition made by the Department is of no basis and thus, deleted. Income from house property - Staff quarter for MRI Staff - Fair rent estimation - HELD THAT:- The property purchased by the assessee at Baroda where he is running OPD being a self-occupied property, no addition on account of notional income is called for. The residential house being ancestral house situated at Village Karamsad which is old and uninhabitable condition belongs to appellant s HUF. In our considered opinion, it cannot be said to be a residential house in individual capacity. However, the house purchased by the assessee at Ahmedabad to meet the needs of medical facilities at Ahmedabad Balasinor, where assessee stays for five days, as much nearer to Ahmedabad rather than Baroda, though, the same has been claimed not let out during the year under consideration cannot be accepted by us as the assessee failed to show that he has tried his best for letting out this property and ultimately becomes unsuccessful. We, thus, direct the Ld. AO to estimate the fair rent @15% of the value of this particular property and to pass order accordingly. This ground of appeal is, therefore, partly allowed.

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• 2023 (9) TMI 146
  Levy of penalty u/s. 271B - default in furnishing of Tax Audit Report - As submitted tax Audit Report is physically filed before the AO during the course of assessment proceedings - As submitted that once the assessment has been completed and the assessee had paid due taxes and immunity has been granted u/s 271AA(2) then penalty u/s 271B should not be imposed - HELD THAT:- Undoubtedly, in the order passed by the Assessing Officer, there is no reference of the provision u/s 271B of the Act and penalty proceedings were initiated without recording the satisfaction by issuing show cause notice. AO, at the time of passing the assessment order, was in possession of the Audit Report which was duly mentioned by him. In section 271B of the Act, the only requirement is to get the accounts of assessee audited or furnish the report of audit as required under section 44AB of the Act. There is no requirement either to file or supply at the time of filing of return of income. The only requirement is to get accounts audited. In the present case, the assessee had filed the proof of furnishing the audit report before Assessing Officer, which had not been disputed by the Assessing Officer in his order. Thus the order of imposing the penalty by CIT(A) s order are without any basis as assessee had satisfactorily proved audit of accounts and report thereof. The above said is also supported by the reasoning given by the Hon ble Supreme Court in the case of M/s. US Technologies International Pvt. Ltd.[ 2023 (4) TMI 418 - SUPREME COURT] - Appeal of assessee allowed.

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• 2023 (9) TMI 145
  Income deemed to accrue or arise in India - Royalty receipt - amount received by the assessee from sale/distribution of software - addition within meaning of Article 12(3) of India Singapore DTAA - assessee is a non resident corporate entity incorporated under the laws of Singapore - HELD THAT:- Assessee is simply a distributor of software. It purchases software from non-resident manufacturers/sellers, such as, Microsoft, Adobe etc. and distributes/sells them to distributors and customers in India. Thus, the assessee itself is not the manufacturer or creator of software. Therefore, assessee cannot own copyright over the softwares as the manufacturer or creator of the software can hold copyright over the software. From the submissions made before the departmental authorities, these facts are clearly discernible. Thus, the products sold by the assessee are ready to use off the shelf or shrink wrapped softwares, which are nothing but copyrighted articles. From the nature of software products sold by the assessee, it can be very well construed that the copyright over the software sold by the assessee were owned by the companies creating such softwares like Microsoft, Adobe, etc. The assessee is merely a trader of software, hence, has no domain or ownership over the software. Thus, when the assessee does not have any ownership over the softwares sold, it could not have transferred the right to use of copyright of the software to distributors/customers in India. In case of Engineering Analysis [ 2021 (3) TMI 138 - SUPREME COURT] while deciding the issue whether the payment made is in the nature of royalty, the Hon ble Supreme Court very clearly and categorically held that the amount paid by resident Indian end users/distributors to non-resident computer software manufactures/suppliers as consideration for the re-sale/use of the computer software through end user license agreement/distribution agreement is not in the nature of royalty for the use of copyright in the computer software, hence, cannot be treated as royalty Thus, in our considered opinion, Commissioner (Appeals) has adopted the right course of action while deleting the addition made by the Assessing Officer. - Decided in favour of assessee.

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• Customs

• 2023 (9) TMI 144
  Revocation of Customs Broker License - forfeiture of security deposit - penalty - gross mis-declaration and undervaluation in import of electronic goods by various importers - statement recorded under section 108 of the Customs Act, retracted - absence of cross examination of the witnesses who made confessional statement - failure to discharge the obligation cast on him under the Regulations - violation of principles of natural justice. Reliance on the statement recorded under Section 108 of the Act for the simple reason that it was not voluntary and has been retracted subsequently - HELD THAT:- In the present case, it is not the stand of the appellant that his statement has been recorded by the department under threat, duress or coercion. In the absence of any such plea the statement made by him under section 108 of the Act are binding on him and the same cannot be discarded on the ground that the same has been retracted - there is no violation of the principles of natural justice in denying the appellant an opportunity to cross examine the two witnesses in view of the voluntary confessional statement made by him under section 108 of the Customs Act. Violation of the Regulation 1(4) of CBLR - HELD THAT:- The submission of the appellant and relying on the statement made by the appellant under section 108 cannot be agreed since he did not have much business in his Customs Broker firm and Sh. Atul Kapoor had contacts with various importers but since he did not have the F-Card therefore, he provided Customs Broker License to him for monetary consideration. This is sufficient to hold that the appellant had sublet his Customs Broker License for monetary gain and thereby violated the provisions of Regulation 1(4) of CBLR, 2018. Violation of the provisions of Regulation 10(a), 10(d), 10(e) and 10(n) of CBLR, 2018 - HELD THAT:- It is clear that on the date when the appellant appeared to give his statement, he did not produce the relevant documents. We would like to point out the statement made by the appellant on issue No. 9 where he was asked about the KYC documents of the said firms and he categorically stated that he does not know anything either about the firms (importers) or their proprietors and also he had not collected any KYC documents of the firm and have also not physically verified the address of the firms - The fact that the appellant had sublet the Customs Broker License for monetary gain of Rs. 25,000/- or Rs. 50,000/- p.m., rest of the work was done entirely by Sh. Atul Kapoor and obviously the appellant would not have any knowledge either of the firms, their Proprietors or the KYC documents. Thus, violation of Regulation 10(a) and 10(n) are established. In the absence of any knowledge, it is prima facie evident that there was no scope for the appellant to comply with these provisions, i.e. to advise his client to comply with the provisions and to exercise due diligence for ascertaining the correctness of the information. The Adjudicating Authority without any material has observed that the Customs Broker played an active role in the scheme devised by various unscrupulous importers to defraud the Revenue by evading the customs duty, that they with malafide intention and knowingly abetted illegal import of the consignments involving gross mis-declaration and undervaluation and therefore the role of accomplice played by the Customs Broker and their employees is clearly proved - No material has been shown from the statement of the appellant to even remotely suggest that he was privy to the actual activity of facilitating the import. In this scenario, on what basis the adjudicating authority has arrived on the findings of mis-declaration and undervaluation against the appellant is missing - such findings are unsustainable in the absence of any material and therefore deserves to be set aside. The punishment has to commensurate with the misconduct and the charges against the appellant are not so grave that extreme punishment of revocation of license is called for. Thus, the impugned order in so far it has ordered for revocation of the licence of the appellant deserves to be set aside, however the forfeiture of the security deposit and penalty of Rs. 50,000/- imposed under Regulation 18 of CBLR, 2018 needs to be maintained. Order under Regulation 14 read with Regulation 17, CBLR revoking the Customs Broker Licence by the impugned order is set aside - Order in terms of Regulation 14 read with Regulation 17, CBLR forfeiting the security amount deposited by the appellant is confirmed - Penalty under Regulation 18 of CBLR of Rs. 50,000/- imposed on the appellant is affirmed. Appeal allowed in part.

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• 2023 (9) TMI 143
  Confiscation - redemption fine - penalty - cow crumbled upper finished leather-off-white - goods did not conform to the criteria of finished leather as per the Public Notice dated 27.05.1992 - HELD THAT:- The Bench directed the Department to furnish the copy of the report. Though several adjournments were given, the Department could not furnish the CLRI report. It has to be seen that part of the consignment has been exported and only one item had been denied the benefit of duty exemption. When the Department is relying upon the report of an expert to hold that the goods do not conform to the standard of Public Notice, they ought to have extracted the relevant portion as part of the order - both the authorities below have not placed the discussions or tests made in the report or the method of testing done by CLRI as part of the report. In the Order-in-Original as well as the Order-in-Appeal it is merely stated that CLRI reported that the goods do not conform to the criteria of Public Notice. If the report was available it would have been possible to check the type of test done and as to how the testing authority has arrived at the conclusion that there is no protective coating. The CLRI report is a very crucial document in deciding the issue as to whether the impugned goods are finished leather or not. The Department has failed to supply the copy of the report to the appellant and also furnish copy before the Tribunal - the confiscation of goods, imposition of redemption fine, penalty and the demand of duty therefore cannot sustain and requires to be set aside. The impugned order is set aside. The appeal is allowed.

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• 2023 (9) TMI 142
  Smuggling - Confiscation of gold / gold jewellery - burden to prove - interpretation of Section 111(d) and (l) of the Customs Act, 1962 - HELD THAT:- There are no concrete evidence, much less any evidence at all to indicate that the gold jewellery that were seized / confiscated were of foreign / Singapore origin. Even the Assayers have not specifically identified the presence of any mark to the effect that the goods in question were of foreign / Singapore origin - there are no material placed on record as to how a gold jewellery could be identified as Singapore make. From the facts of the case, admittedly, the gold / gold jewellery were not seized during the course of import and nor has the Revenue proved that the goods in question were of foreign / Singapore origin. Had the Assayers been subjected to cross-examination, perhaps they would have revealed as to the basis for their conclusion as to the source of the goods in question, but in any case, neither the mahazar nor even the Assayers report give any proof that any of the gold jewellery involved had any mark as to their foreign origin and hence, the burden under Section 123 ibid. remains on the Revenue. On going through the documents placed on record, the Order-in-Original and the Show Cause Notice, it appears to us that the Department has not pursued the investigation after issuing the Show Cause Notice and the only effort seems to be that since no valid import documents could be produced by the first appellant-person carrying the gold, the same were deemed to be smuggled into India - It was not the intention of the Government to bring back the Gold (Control) Act albeit by a backdoor entry, by notifying gold under Section 123 ibid. The Revenue, therefore, is required to prove that the gold jewellery were of smuggled nature, even when it is notified under Section 123. The officers of the Department had no reasonable belief that the gold jewellery seized were smuggled and therefore, they have not discharged their primary responsibility of forming a prima facie / reasonable belief under Section 123 ibid., without which, the burden of proof could not shift to the appellants from whom the goods in question have been seized. Aspect of cross-examination - HELD THAT:- The investigation concluded the seized jewellery as foreign jewellery only basing on these Assayers certificates, as reproduced supra, and the basis for their appraisal is not forthcoming, as to whether it is on the basis of their experience or on account of the model, purity or any other characteristic which differentiates Indian jewellery from Singapore jewellery. The methodology adopted to arrive at such a determination and as to whether any known processes / methods have been adopted have not been stated. Further, on all the jewellery, there are no foreign markings and hence, there is no reasonable basis to conclude these to be of imported origin - the burden of proof does not shift to the appellants, but the burden lies on the investigating agency to prove that the seized jewellery were of foreign origin. This is a case where the appellants have been penalized for an alleged activity which, according to the Revenue, has resulted in confiscation of the allegedly imported goods. When, therefore, a Show Cause Notice is issued by the DRI, a reasonable belief is required to be established before alleging any activity in the nature of smuggling. In the case of town seizure, the initial burden is always on the Revenue to prove as to what prompted it to reasonably believe that the gold / gold jewellery in question were smuggled / of foreign origin. The confiscation of the gold / gold jewellery from the appellants is bad in law, the Revenue has also failed to establish / prove that any of the gold / gold jewellery confiscated from the appellants had any marking as to its foreign origin and that the Revenue acted in a haste and without reasonable belief that the impugned goods were smuggled - the Revenue has not established that the goods in question were liable for confiscation in any manner known under law. Nor has the Revenue placed any piece of evidence on record to even suggest that the gold jewellery that were seized had any marking as to their foreign origin and hence, there was no import at all. The penalty under Section 112 not being automatic, cannot be imposed in the facts of this case, on the appellants - impugned order set aside - appeal allowed.

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• 2023 (9) TMI 141
  Exemption from Basic Customs Duty and Additional Customs Duty - appellant s claim is that the imported goods were to be classified under Sl. No. 15 of the Notification No. 24/2005 dated 01.03.2005, as amended by Notification No. 132/2006 dated 30.12.2006 - HELD THAT:- The denial of benefit of Notification No. 24/2005 is unsustainable since the impugned order is contrary to the interpretation of law as drawn by the Hon ble Apex Court SHARE MEDICAL CARE VERSUS UNION OF INDIA [ 2007 (2) TMI 2 - SUPREME COURT] and, therefore, the same deserves to be set aside. It was held in the said case that well settled law is that in case the applicant is entitled to benefit under two different Notifications or under two different Heads, he can claim more benefit and it is the duty of the authorities to grant such benefits if the applicant is otherwise entitled to such benefit. Appeal allowed.

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• Insolvency & Bankruptcy

• 2023 (9) TMI 140
  Admission of the Corporate Debtor into CIRP by the Adjudicating Authority - claim made by SHPL that they should be treated as Financial Creditor and the CIRP be started afresh with a newly constituted CoC is legally tenable? - affirmation of proposal of the CoC to liquidate the Corporate Debtor. HELD THAT:- Respondent No.2 was not a signatory to the DA is therefore undisputed. There is no other agreement between Respondent No. 2 and SHPL either prior to or subsequent to the payment of Rs. 1.90 crore which has been placed on record. We notice that Respondent No.2 in Part IV had attached copies of their passbook of Canara Bank which clearly shows that there was a direct disbursal to the Corporate Debtor and there is no denial on that count by the Corporate Debtor. It is trite law that under the IBC once a debt which becomes due or payable, in law and in fact, and if there is incidence of non-payment of the said debt in full or even part thereof, CIRP may be triggered by the financial creditor as long as the amount in default is above the threshold limit. It is also well accepted that debt means a liability in respect of a claim and claim means a right to payment even if it is disputed. There is sufficient material on record to prove that there was disbursal of funds by Respondent No.2 to the Corporate Debtor in their account. Admittedly, the amount so disbursed is Rs.1.90 crore. The bank transaction details were made a part of Part IV before the Adjudicating Authority - the submission advanced that Corporate Debtor was not required to repay Respondent No.2 does not inspire our confidence as it is a mere assertion not supported by evidence. Clearly the CoC had decided in the 3rd CoC meeting after considering all facts and circumstances that it was not feasible to keep the Corporate Debtor as a going concern and that there was no possibility for resolution plans in the present matter and hence with 100% voting had recommended that an application for liquidation of the corporate debtor be filed before the adjudicating authority - Once the CoC with 100% vote share had found that the company is not a running company and cannot be revived as there is no employee or any business activity, the decision of the CoC becomes a business decision of the majority of the CoC. Under such circumstances, the Resolution Professional had rightly placed the liquidation proposal before the Adjudicating Authority. Whether there is force in the contention of SHPL that they should have been treated as Financial Creditor and that not having taken place, CIRP should be started afresh with a newly constituted CoC? - HELD THAT:- The publication in the newspapers not having been denied by SHPL is ample proof that wide publicity was caused to invite claims. SHPL was also sent a written email by the Resolution Professional to submit claims which has also not been controverted. Nothing prevented them from filing their claims but instead they chose to adopt a wait and watch strategy - having failed to file their claim in the appropriate format and in a timely manner due to their own negligence, they should be ready to suffer the consequences of late and improper filing. SHPL cannot be accorded the status of Financial Creditor and therefore the prayer of SHPL to reconstitute the CoC does not merit consideration. Further, since the Adjudicating Authority has already approved the liquidation and allowed SHPL to file its claim, we are satisfied that the interests of SHPL have not been put to prejudice. The second impugned order of 04.08.2022 approving the liquidation of the Corporate Debtor has subsumed the first impugned order dated 01.11.2021 which had admitted the Corporate Debtor into CIRP - there are no reasons which warrant any interference in the second impugned order of the Adjudicating Authority - appeal dismissed.

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• 2023 (9) TMI 139
  CIRP - Consequence of the attachment on the assets of the property - Sales Tax Department can be held to be Secured Creditor or not - HELD THAT:- The Respondent Department cannot be treated as secured creditor of the Corporate Debtor - even when there is attachment of the assets, Sales Tax Department cannot be the owner of the assets and the asset continued to be owned by the Corporate Debtor and will be part of the Liquidation Estate. The Adjudicating Authority committed error in rejecting the I.A. filed by the Liquidator relying on the Judgment of Hon ble Supreme Court in M/s. Embassy Property Development Pvt. Ltd. [ 2019 (12) TMI 188 - SUPREME COURT] which judgment has no application in the facts of the present case - It was held in the case that NCLT and NCLAT would have jurisdiction to enquire into questions of fraud, they would not have jurisdiction to adjudicate upon disputes such as those arising under MMDR Act, 1957 and the rules issued thereunder, especially when the disputes revolve around decisions of statutory or quasijudicial authorities, which can be corrected only by way of judicial review of administrative action. Hence, the High Court was justified in entertaining the writ petition and we see no reason to interfere with the decision of the High Court. The Order of the Adjudicating Authority in the Appeal cannot be sustained - Appeal allowed.

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• Service Tax

• 2023 (9) TMI 138
  Condonation of huge delay of 402 days in filing this civil appeal - sufficient reasons for delay or not - HELD THAT:- The explanation offered by the petitioner for condoning the delay is not satisfying. The said explanation is not sufficient in law to condone the delay of 402 days in filing this statutory appeal. The application seeking condonation of delay is dismissed.

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• 2023 (9) TMI 137
  Partly denying a portion of credits - improper document and unavailable document - only on certain documents the Service Tax registration numbers were not reflected which should have been treated as procedural infraction - HELD THAT:- It is not the case of the Appellant that Service Tax registration was not taken at the time bill copies were printed but it appears that the registration numbers were purposefully omitted from being reflected, in some of the invoices by deleting the same from the relevant place where as the same is found reflected in bill dated 12.06.2009. This aspect is not referred in the show-cause notice though the same show-cause notice was issued on the basis of investigation but the genuineness of the invoices are doubtful since placing the Service Tax registration number is conspicuous by its absence that would put the invoices in the category of inadmissible document. On the issue of taking credit without supporting invoices Appellant might have procured/discovered those invoices subsequently and produced the same at the time of hearing of these appeals before this Tribunal but the same cannot be taken as additional piece of evidence in the absence of following procedure contained in Rule 23 of the CESTAT (Procedure) Rules, 1982, when manifestedly the Commissioner had made categorical observation with reference to Assessee-Appellant s own reply letter that they had no other document available at their end for production. Appeal dismissed.

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• 2023 (9) TMI 136
  Refund claims of SEZ Units/Developers - rejection on the ground of filing beyond the prescribed period of one year or on the ground that since for that specific quarter they have already filed the refund claims earlier, second claim for the same quarter cannot be entertained? HELD THAT:- When the services rendered by the appellant are fully exempted from service tax in terms of the provisions of the SEZ Act, which is complete code in itself, the condition for refund imposed under the Notification dated 1.7.2013 issued under the Finance Act are certainly inconsistent with the SEZ Act. A combined reading of Section 26(1)(e) ibid r/w Rule 31 ibid would show that the only condition required for availing exemption from payment of Service Tax by a SEZ unit/ Developer is that the taxable service should be used for carrying out the authorized operations by the SEZ Unit/Developer. There is no dispute that the operations of the appellant were authorised under the SEZ Act and there is no allegation anywhere that any of the conditions laid down under Rule 31 have been violated. Whether there is any requirement of filing refund claim in same quarter under exemption Notification when the Service Tax itself was exempted by Section 26 ibid? - HELD THAT:- It is settled and can be safely said that availability of exemptions under Section 26 ibid would depend only upon the terms and conditions prescribed under the SEZ Act or Rules framed thereunder and cannot be restricted by the terms or conditions including limitation as prescribed in the notification - Since exemption from payment of service tax on taxable services rendered to a Developer or a Unit by any service provider shall be available for the authorized operations in a Special Economic Zone therefore the appellant, for those services, are not liable to pay any tax/duty as Article 265 of the Constitution of India specifically provides that no tax or duty can be either levied or collected except by authority of law - the genuineness or otherwise of the refund claims, after examining the invoices and other relevant documents, cannot be done at this stage as the same have to be verified by the authority concerned for which the matter needs to be remand. The matter is remanded to the Adjudicating Authority to the limited extent in order to enable the said authority to grant the refund claim, after carefully verifying the relevant supporting documents and after following the principle of natural justice - Appeal allowed by way of remand.

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• 2023 (9) TMI 135
  Denial of utilization of the CENVAT credit for discharging service tax liability - Import of Service - services qualify as output services or not - Denial of inter-adjustment of amount paid within various heads against the liability - Rule 3(4)(e) of the Cenvat Credit Rules, 2004. Denial of utilization of the CENVAT credit for discharging service tax liability in relation to Import of Service - HELD THAT:- The interpretation of Rule 3(4) of the Cenvat Credit Rules, 1994 by the Ld. Commissioner in the impugned order is legally not tenable - an Explanation has been added to Rule 3(4)(e) of the Cenvat Credit Rules, 2004, w.e.f.01.07.2012, to the effect that Cenvat credit cannot be used for payment of service tax in respect of services where the person liable to pay tax is the service recipient . Thus, it is amply clear that there was no such restriction in the Cenvat Credit Rules, 2004, prior to 01.07.2012. The period involved in the present dispute is 2009, which is prior to insertion of the Explanation to Rule 3(4)(e) w.e.f., 1.7.2012. Hence we, hold that such restriction of utilization of Cenvat credit was not applicable for the period under dispute - the utilization of Cevat Credit for payment of service tax on import of service by the Appellant is legally tenable. Denial of inter-adjustment of amount paid within various heads against the liability - HELD THAT:- The Appellant has paid the total tax payable during the disputed period correctly. If the adjustment is allowed between the excess service tax paid and the short paid Education Cess/SHE Cess and vice versa, then there was short payment of Rs. 895,160/- only in the month of January 2008, which has already been paid by them on 5th May 2008. Thus, the contention of the Appellant is that if the adjustment is permitted then there won t be any short payment overall. Accordingly, they contended that the demand confirmed in the impugned order is not sustainable. Thus, the issue to be decided in this case is whether excess /short paid amount under the service tax head can be adjusted for payment of excess/short paid amount in Education Cess or not. A similar issue under Central Excise came before the Hon ble High Court of Guwahati in the case of UNION OF INDIA VERSUS KAMAKHYA COSMETICS PHARMACEUTICAL PVT. LTD. [ 2012 (7) TMI 902 - GAUHATI HIGH COURT ], where Hon ble High Court has held that Cenvat credit of Basic Central Excise duty can be utilzed for payment of Education Cess/SHE Cess and vice versa. The same analogy is applicable for service tax also. Following the decision of the Hon ble Guwahati High Court, it is held that excess amount paid in service tax can be adjusted against the short payment in Education Cess/SHE Cess. After adjustment, there was a short payment of Rs.8.95.160/- only in the month of January 2008, which has already paid by the Appellant. Accordingly, the demand confirmed in the impugned order on this count is not sustainable. Since both the issues involved in the present appeal are decided in favour of the Appellant, the entire demand along with interest confirmed in the impugned order is liable to be set aside. As the demand is not sustainable, there is no penalty imposable on the Appellant. Accordingly, the impugned order is set aside - appeal allowed.

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• 2023 (9) TMI 134
  Levy of service tax - franchisee service - exclusivity charges for granting rights of distribution and sale of its products - HELD THAT:- From the explanation provided by the Circular No. B-1/6/2005-TRU dated 27.07.2005, it can be seen that merely because by an agreement a right is confirmed on the party to sale of goods or service undertaken was not ipso-facto bringing the agreement within the ambit of franchisee. What is essentially required is to establish that as per the agreement the rights has not conferred on franchisee which amount to representational rights - the representational right would mean that for all practical purposes the franchisee losses its own identity and acquire with that of the franchisor. The agreement is primarily for marketing, promotion and distribution of the products in India by the distributors appointed by the appellant for the various territories. The amount of Exclusivity Fee of Rs. 30 Lakh being charged by the appellant from its distributors in the five equal installments of Rs. 6lakh each is an amount of deposit with the appellant and if any distributorship get cancelled before the period of five years, the deposit which has been made by the appointed distributors under the category of Exclusivity Fee is being returned on the pro-rata basis by the appellant - The Exclusivity Fee which is being charged by the appellant from its distributors is a kind of guarantee amount rather than any franchisee fee. From the terms of agreement, appellant is not given any representational right to its distributors to sale or manufacture goods or provide service or undertake any process identify with the franchisor and the agreement is purely for marketing of product and therefore same cannot be termed as agreement between the franchisor and franchisee. This Tribunal in the case of M/S. SITI CABLE NETWORK LTD. (FORMERLY KNOWN AS WIRE WIRELESS (I) LTD.) VERSUS COMMISSIONER OF SERVICE TAX, DELHI-III (VICE-VERSA) [ 2020 (8) TMI 79 - CESTAT NEW DELHI] where it was held that Representational right means a right that is available with the franchisee to represent the franchisor and in that case the franchisee loses its individual identity and is known only by the identity of the franchisor . The impugned order-in-appeal is devoid of any merits - Appeal allowed.

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• Central Excise

• 2023 (9) TMI 133
  Reversal of CENVAT Credit - value of sludge/waste under the provisions of sub-rule (3) of Rule 6 of Cenvat Credit Rules, 2004 inevitably arising out during the manufacture of paper and paper board - HELD THAT:- In the Appellant s own case COMMISSIONER OF CENTRAL EXCISE, MEERUT-I VERSUS STAR PAPER MILLS LTD. [ 2003 (9) TMI 204 - CESTAT, NEW DELHI] Tribunal rejected the Department s appeal by holding When the Waste Sludge is squarely covered by the provisions of Rule 57D(1), Modvat credit would get settled in accordance with that rule and there is no scope to apply the provisions of Rule 57CC for the same set of transactions. Hon ble Supreme Court in the case of UNION OF INDIA VERSUS AHMEDABAD ELECTRICITY CO. LTD. [ 2003 (10) TMI 47 - SUPREME COURT] has held that since excise duty is an incidence of manufacture therefore it is essential that the product in question should have gone through a process of manufacture. The issue is no more res integra and decided in favour of the Appellant - Appeal allowed.

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• Indian Laws

• 2023 (9) TMI 132
  Dishonor of Cheque - Counter allegation of deception - Supply of inferior quality of goods - suddenly stopped to supply the goods, which had again caused considerable loss - deposit of some post-dated cheques for encashment beyond the terms and conditions, without intimation - HELD THAT:- Admittedly one criminal prosecution is pending u/s 138 of NI Act against the present complainant. The present complainant initiated the instant criminal compliant with the allegation of cheating and criminal breach of trust. The complainant has adopted a procedure in the form of criminal complaint against a company which have filed a criminal prosecution u/s 138 of NI Act. The way of approaching the court of Magistrate by the complainant company appears to be the counter blast of the criminal prosecution u/s 138 of NI Act - ends of justice cannot be arrived at between the parties under the fear of the process of the court. The private companies are regularly filing mischievous complaint before the court of Magistrate in similar fashions nowadays. The Hon ble Supreme court in several occasions has come heavily upon such conduct of the complainant. The Hon ble Supreme Court in the of State of Hariyana Vs. Bhajanlal [ 1990 (11) TMI 386 - SUPREME COURT ] has specifically observed that if after taking the petition of complaint and evidences therein to be true, the court find no prima facie offence being made out against the accused persons, the High Court is free to quash the proceeding u/s 482 of Cr.P.C. So considering the entire facts and circumstances of this case and considering the materials on record, there are merits to entertain the criminal revision - impugned Order passed by the Learned Magister is hereby set aside - revision allowed.

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